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CIRCULAR No

CIRCULAR No. 136/1999/TT-BTC OF NOVEMBER 19, 1999 GUIDING THE INVESTMENT CAPITAL SETTLEMENT

Pursuant to the State Budget Law promulgated on March 20, 1996;

Pursuant to the Law of May 20, 1998 Amending and Supplementing a Number of Articles of the State Budget Law;

Pursuant to the Government�s Decree No.52/1999/ND-CP of July 8, 1999 promulgating the Regulation on Investment and Construction Management;

Pursuant to the Government�s Decree No.145/1999/ND-CP of September 20, 1999 on re-organization of the General Department of Development Investment under the Finance Ministry;

The Finance Ministry hereby provides the following guidance on the final settlement of investment capital:

Part I

GENERAL PROVISIONS

1. All investment projects of State agencies and enterprises, after having been completed and put into exploitation and use, shall be subject to the investment capital settlement. Investors shall take responsibility therefor. The investment capital settlement must ensure the contents and time for elaboration, examination and approval as prescribed in this Circular.

2. The to- be settled investment capital is the total lawful expenses made in the course of investment in order to put the project into exploitation and use. The lawful expenses are the expenses made in strict compliance with the signed contract(s) and the ratified cost estimate design, ensuring the conformity with the set criteria, norms, unit prices, financial and accounting regime as well as the relevant current regulations of the State. The to-be settled investment capital shall not exceed the ratified or adjusted (if any) total investment.

3. For projects invested with different capital sources, the settlement must clearly analyze each of such sources.

4. The investment capital settlement report must fully and accurately determine the investment capital amount disbursed annually; and the total investment capital for implementation of the project, including the investment preparation expense, the investment execution preparation expense, the investment execu-tion expense, the production preparation expense, the investor�s loan interests during the investment execution, the insurance expense and other lawful expenses as currently prescribed. The value of damage shall not be accounted into the project�s value or the value of assets handed over for exploitation and use. For long-term investment projects, the investors shall, during the settlement, convert the already disbursed investment capital into the value level at the time of project hand-over for exploitation and use, in order to determine the value of the newly-arising fixed assets as well as the value of the handed-over assets.

5. The investment capital settlement shall serve as basis for evaluation of the investment process and drawing of experiences to enhance the management of investment capital.

Part II

SPECIFIC PROVISIONS

I. CONTENTS OF THE INVESTMENT CAPITAL SETTLEMENT REPORT

The contents of the settlement report must conform to each type of project: The completed investment project, the completed planning project, the completed investment preparation project, the group-A project with many component projects or minor projects, and the project using foreign capital.

1. For the completed investment projects:

1.1. Investment capital for project implementation through the years:

- The total investment capital for project implementation from the stage of investment preparation to the construction completion and putting of the project into exploitation and use.

- Clearly determining each of the investment capital sources for project implementation: State budget capital, State investment credit capital, credit capital guaranteed by the State, development investment capital of State enterprises and other capital sources.

- The project investment capital structure includes capital for construction and installation, capital for equipment and capital for other expenses.

1.2. The damage value, which shall not be accounted into the value of handed-over assets:

- Damage caused by natural calamities, enemy sabotage and other force majeure circumstances, which are not insured.

- The value of the project volume cancelled by decision of the level competent to decide the investment.

1.3. The value of handed-over assets:

- The value of newly-arising fixed assets and liquid assets created by investment and handed over for production and use is the total investment capital for project implementation through the years minus the expenses which are not accounted into the project assets� value and reflected according to the actual value and prices for conversion to the price level at the time of hand-over of the project for exploitation and use.

The method of conversion to the price level at the time of hand-over shall comply with the Construction Ministry�s guidance after consultation with the Finance Ministry and the Ministry of Planning and Investment.

Where the guidance on price conversion method is not available when making the investment capital settlement report, the investor shall send a written request to the Ministry of Construction for such guidance which shall serve as a basis for making the settlement report.

- The newly-arising fixed assets shall be classified and evaluated according to the following principles: All expenses related directly to a fixed asset shall be calculated for such asset; the common expenses related to various fixed assets shall be distributed according to the ratio between the direct expense level of each fixed asset and the total direct expenses for all fixed assets.

- Where the assets are handed over to different units for use, it is necessary to make a full list and determine the total value of fixed assets and movable assets handed over to each unit.

2. For a completed planning project, the investor shall have to make the planning capital settlement report, which must state sources of capital already received and used according to the cost estimates ratified by the competent level, and be enclosed with the explanation on the project implementation results.

3. For a completed investment preparation project, the investor shall have to make the investment preparation capital settlement report as for the planning project.

4. For a group-A project composed of different component (or minor) projects, when a component (or minor) project is completed, the investor shall have to make the investment capital settlement report as for the group-A project.

5. For investment projects using foreign capital, when they are completed, in addition to the settlement reports to be elaborated, examined and approved according to the provisions of this Circular, the investors shall also have to draw up a separate investment capital settlement report at the request of international organizations inscribed in the loan agreement(s) (if any).

II. DOSSIERS OF INVESTMENT CAPITAL SETTLEMENT REPORT

1. A dossier of investment capital settlement report for a completed project shall include:

- The legal documents: Stating legal bases for project investment.

- The sum-up report on the settlement of the completed investment capital: giving an overview on the project investment situation and results as well as the remaining problems and investor�s proposed solution thereof.

- The report on investment execution through the years: reflecting the situation on the use of investment capital from the time of investment preparation to the completion of the project and putting it into exploitation and use.

- The report on the disbursement of investment capital according to the completed works: reflecting the disbursement of investment capital for each work in case the project is composed of 2 or more works.

- The report on the amount and value of the newly-arising fixed assets: reflecting the amount and value of each of the newly-arising fixed assets according to the conversion prices and classified by the use subjects.

- The report on the amount and value of the handed-over movable assets: reflecting the amount and value of assets according to the conversion prices of each type of raw material, material, fuel, accessory and labor tool, which fail to meet the fixed assets� standards, and other expenses belonging to the liquid assets which are handed over to the units for use.

- The debt situation: reflecting the loans and debts (to be recovered and paid) which have not been settled by the time of investment capital settlement, and proposing remedial measures.

- The table of comparison and certification of data on investment capital payment by the State treasury and the capital-lending agency(ies): Where the payment for a project is made by different State treasuries, the comparison and certification by each treasury is required.

- The explanation on the investment capital settlement report: reflecting the project�s major changes; difficulties and advantages in the course of project implementation, and proposing remedial measures.

- The minutes (copy) on the general pre-acceptance test or the minutes on the pre-acceptance test for project hand-over between the investor and the contractor.

- The minutes (if any) on the asset hand-over between the investor and the other using unit(s).

In the course of examining the investment capital settlement, if deeming it necessary, the settlement examining agency may ask the investor to provide other documents related to the project�s investment capital settlement.

2. Dossiers of investment capital settlement reports for planning projects and investment preparation projects shall include:

- The legal documents

- The sum-up report on the final settlement of the completed investment capital

- The report on the investment execution situation through the years

- The report on the debt situation

- The table of comparison and certification of data on investment capital payment by the State treasury(ies) or the capital-lending agency(ies).

3. For investment projects requiring only investment reports, when they are completed, investors shall have to elaborate only reports on the settlement of the completed investment capital, which shall be attached with the minutes on the project pre-acceptance test between the investors and the contractors.

4. Requirements on dossiers of investment capital settlement report

An investment capital settlement report must be complete and strictly comply with the model reports suited to each type of project as prescribed at Points 1, 2 and 3 of this Section. The data in the model reports must be clear while the proposals must be concrete, brief and easy to understand.

A dossier of investment capital settlement report must contain all signatures of the chief accountant; the head of the project management board (for projects with management boards); the project executive manager (for projects implemented in form of project executive manager) and the investor.

III. EXAMINATION OF THE INVESTMENT CAPITAL SETTLEMENT

1. Contents of examination of the investment capital settlement

1.1. Examining the legality of investment in the project construction:

- Examining, comparing lists and contents of legal documents in the project dossier, ensuring their conformity with the State�s current regulations.

- Examining the legality of economic contracts concluded between the investor and the contractors (on consultancy, construction and installation, material and equipment supply).

1.2. Examining the investment capital amount disbursed annually

- Examining every source of capital annually invested in the implementation of the project, compared with the capital source structure already defined in the investment decision and the annual investment plans.

- Analyzing, comparing the structure of the disbursed investment capital (for construction and installation, equipment and other expenses) with the investment capital structure stated in the investment decision and the ratified total cost estimates.

1.3. Examining the value of the completed construction and installation volume

- Examining the value of the project�s construction and installation volume proposed for the settlement against the value of the ratified cost estimates and determining the causes of such increase or decrease.

- Examining the application of the State�s norms and unit prices to each type of expense in each period.

- Considering the pre-acceptance test minutes in order to determine the construction and installation expenses for the settlement.

1.4. Examining the value of the completed equipment volume:

- Examining the equipment�s compatibility with the list, type, quantity, technical specifications and prices stated in the investment decision and the signed economic contracts.

- Examining the purchasing, processing and manufacturing prices of equipment.

- Examining the equipment-related expenses: transportation expense, preservation expense.

1.5. Examining other expenses by comparing the capital amount proposed for the settlement of each type of expenses with the ratified cost estimates and the current regime on management of other expenses in investment and construction.

1.6. Examining the value of damage not calculated in the project value:

- The value of damage caused by natural calamities, enemy sabotage and other force majeure circumstances, which are not insured.

- The value of project volume canceled by decision of the level deciding the investment.

1.7. Examining the evaluation of assets handed over for exploitation and use by different units:

Examining the determination of actual value of the annual investment and the value converted into the price level at the time of handing over the assets, including the newly-arising fixed assets and movable assets, for exploitation and use.

1.8. Examining the situation on debts, materials and equipment in stock:

- Debts to-be recovered and to be repaid

- The value of materials and equipment in stock

- The value of assets of the project management board.

1.9. For project volumes and/or work carried out in form of bidding, the settlement examination should focus on the following contents:

- Examining the legal documents related to the investment project, bid organization, bidding results and the approval thereof.

- Examining the value proposed for settlement on the basis of the bid winning prices.

- Examining the volume and value arising outside the bid packages, determining the causes of such decrease or increase.

After examining the investment capital settlement report, the settlement examining agency shall have to send a report thereon to the agency competent to approve the settlement.

2. Agencies examining the investment capital settlements:

Before approving the investment capital settlements of the completed projects, it is necessary to examine the investment capital settlement reports according to the following assignment of responsibilities:

- For group-A projects: The Ministry of Finance shall assume the prime responsibility for organization of examination.

- For the other projects:

+ For the centrally-run projects, the agencies with function to assist the ministers (heads of the ministerial-level agencies, the agencies attached to the Government, the central bodies of mass organizations, the Party Central Committee�s Commission for Financial Management, the chairmen of the managing boards of State corporations) shall assume the prime responsibility for examination.

+ For the locally-run projects, the provincial/municipal Finance-Pricing Departments shall assume the prime responsibility in organization of examination.

In case of necessity, the Finance Ministry and the agencies competent to approve the settlements may set up consultancy teams to assist them in the examination of settlements before approving them:

- The consultancy teams for examination of investment capital settlements of group-A projects shall be set up by decision of the Finance Minister and composed of representatives of the Ministry of Planning and Investment, the Ministry of Construction, the branch-managing ministries, the relevant ministries, and the People�s Committees of the provinces and centrally-run cities (for the locally-run projects).

- For the other projects, the establishment of the consultancy teams for examination of investment capital settlements shall be decided by the agencies competent to approve the investment capital settlements.

3. Form of organizing the examination of investment capital settlement report:

The person competent to approve the settlement (stipulated at Point 1, Section IV of this Circular) shall decide the form of examining the investment capital settlement. The agency competent to approve the settlement shall have to issue a decision assigning the task of examination to the functional agency to examine the investment capital settlement.

- Where the agency competent to approve the settlement decides to hire an independent auditing organization to audit the investment capital settlement report, the investor shall sign an auditing contract with the independent auditing organization lawfully operating in Vietnam, which shall conduct the audit according to the contents and auditing fee levels set by the agency competent to approve the settlement. The auditing organization shall take responsibility before law for the auditing results.

The functional agency of (or attached to) the level competent to approve the settlement shall re-examine the auditing results; the contents of such re-examination shall include:

- Examining the auditing results� compatibility with the auditing contract and the contents of investment capital settlement examination stipulated in this Circular.

- Examining the legal bases for investment and construction management promulgated by the competent State management agencies, which have been used in audit by the auditing organization such as standards and regulations; construction rules; construction designing procedures and process; regulations on the management of project quality; system of norms and unit prices; and mechanism for the management of investment capital allocation and settlement.

- Re-examining the discrepant results of the auditing report and the investment capital settlement report made by the investor.

- Examining the investor�s proposals as well as proposals of the independent auditing organization.

Where the project has been audited, if the agency competent to approve the settlement or the law enforcement agency detects that the value of investment capital proposed for the settlement is incorrect with the error rate of 1.5% (for group-A projects), 2% (for group-B projects) or 3% (for group- C projects) or more, the auditing agency shall take material responsibility for damage caused by the wrong auditing results; serious cases shall be handled according to the current law provisions.

IV. APPROVAL OF THE INVESTMENT CAPITAL SETTLEMENT

1. Competence to approve the investment capital settlement

- The investment capital settlements of group-A projects shall be approved by the Finance Minister under the Prime Minister�s authorization.

- For the other projects, the persons competent to decide investment shall also be the persons competent to approve the capital investment settlements.

2. Agencies receiving the approved investment capital settlements:

A copy of the written approval of the completed project�s investment capital settlement must be sent to each of the following agencies:

2.1. For group-A projects:

- The Finance Ministry

- The superior level of the investor

- The branch-managing ministry

- The investment capital- paying and -lending agency(ies)

2.2. For the other projects:

- For the centrally-run projects

+ The investment-deciding agency

+ The Finance Ministry

+ The investment capital- paying and -lending agency(ies)

- For the locally-run projects

+ The investment-deciding agency

+ The finance agency of the same level which has decided the investment

+ The investment capital- paying and -lending agency(ies)

V. TIME FOR ELABORATION, EXAMINATION AND APPROVAL OF THE INVESTMENT CAPITAL SETTLEMENT

1. For group-A projects:

- The time for elaboration of an investment capital settlement report shall not exceed 6 months after the investment project is completed and put into exploitation and use.

- The time for examination of the settlement shall not exceed 4 months after the receipt of a complete and valid dossier of investment capital settlement report as stipulated in Section II of this Circular.

- The time for approval of the investment capital settlement shall not exceed 1 month after the receipt of a dossier of the already examined settlement report.

2. For the other projects:

- The time for completing elaboration of the investment capital settlement report shall not exceed 3 months after the project is completed and put into exploitation and use.

- The time for examination of the settlement shall not exceed 2 months for group-B projects and 1 month for group-C projects, after receipt of a complete and valid dossier of investment capital settlement report.

- The time for approval of the investment capital settlement shall not exceed 15 days.

3. In special cases: The prolongation of the time for elaboration, examination and approval of investment capital settlements shall be decided by the persons competent to approve such settlements.

VI. EXPENSES FOR EXAMINATION AND APPROVAL OF THE INVESTMENT

CAPITAL SETTLEMENT

1. The expense for examination and approval of investment capital settlement of a completed project shall be accounted into other expenses in the project�s ratified total cost estimate and shall be managed and used by the agency in charge of the settlement examination.

2. Percentages and levels of expense deduction for examination and approval of investment capital settlement

2.1. On the basis of the total investment and characteristics of each project, the expense for examination and approval of investment capital settlement of the completed project shall be calculated in percentages (%) of the total investment level of the project as follows:

Total investment (billion VND)

³ 1

>1-5

>5-10

>10-100

>100-500

>500-1,000

>1,000

Percentage (%)

0.08

0.05

0.04

Absolute deduction level (million VND)

1 mil. VND

5 mil. VND

8 mil. VND

³ 10 mil. VND

³ 80 mil. VND

³ 250 mil. VND

400 mil. VND

2.2. For a group-A project composed of different component (or minor) projects, the expense deduction level for examination and approval of the settlements of the completed component (or minor) projects shall be calculated according to the following formula:

The total investment of the

The deduction level The deduction component (minor) project

for the component = level for the x ------------------------------------------ x 80%

(minor project) whole project The total investment of the project

2.3. For a project with capital for equipment accounting for 51%-75% of the total investment, the expense deduction level for the settlement examination and approval shall be equal to 75% of the corresponding expense level or percentage stipulated at Point 2, Section VI of this Circular.

2.4. For a project with capital for equipment accounting for over 75% of the total investment, the expense deduction level for the settlement examination and approval shall be equal to 50% of the corresponding expense level or percentage stipulated at Point 2, Section VI of this Circular.

2.5. The expenses for examination and approval of investment capital settlements of the completed projects mentioned at Points 2.1; 2.2; 2.3 and 2.4, Section VI, shall also include the expenses for settlement examination and approval, and the auditing expense (if any).

The settlement examination and approval expenses shall be distributed to the following types of work:

- At most 10% for approval of the investment capital settlement.

- At least 90% for examination of the investment capital settlement.

Where an independent auditing organization is hired to audit the settlement report, the auditing expense shall not exceed 75%.

3. Management and use of the settlement examination and approval expenses

3.1. On the basis of the estimated expenses for examination and approval of the investment capital settlement of a completed project, the investor shall make payment to the agency in charge of the settlement examination. In case of hiring an auditing agency to audit the settlement report, the investor shall make payment to the auditing agency according to the signed contract; the remaining expenses shall be paid to the agency in charge of the settlement examination.

3.2. The agency in charge of examination of the investment capital settlement shall draw up an estimate of expenses for the settlement examination and approval and submit it to the person competent to approve the settlement for ratification in order to have a basis for use. The agency in charge of examination of the investment capital settlement shall have to manage, use and settle the settlement examination and approval expenses in strict compliance with the ratified estimate as well as the current financial and accounting regime.

3.3. The expenses for examination and approval of investment capital settlements of the completed projects shall include the following:

- The expense for the auditing agency according to the signed contract (if any).

- The expense for remuneration payment to members of the consultancy team for investment capital settlement examination.

- The payment to domestic and foreign organizations and/or individuals that examine the settlement at the request of the agency in charge of examination and approval of the investment capital settlement (if any).

- The expense for work trip allowances, stationery, translation, printing, conferences, workshops and other expenses for the settlement examination and approval work.

VII. RESPONSIBILITIES OF THE INVESTOR AND RELEVANT AGENCIES

1. The investor:

- To coordinate with the contracting units to settle problems on the received materials and equipment, the debt payment and the other arising problems according to the signed contracts.

- To examine the settlement of the value of contracts (on construction and installation, material and equipment supply and/or consultancy) which are completed by the contracting units.

- To inventory and evaluate the remaining assets of the project management board in order to hand them over to the units for production, use or liquidation to recover capital.

- To close the accounting books, arrange and classify document files in service of the investment capital settlement.

- To compare and certify the already settled capital amount or the borrowed capital, debts and assets transferred between the relevant agencies.

- To draw up the investment capital settlement report of the completed project on schedule and with the contents stipulated in this Circular, and take responsibility for the accuracy of data and documents in the investment capital settlement report.

- To provide all documents related to the investment capital settlement at the request of the settlement examining agency.

- To sign the auditing contract with the lawful auditing agencies after the person competent to approve the settlement issues a decision thereon.

2. The contracting units (for consultancy, construction and installation and equipment supply):

To coordinate with the investor in definitely settling the remaining problems according to the contract, to provide and take legal liability for data and documents related to the investor�s investment capital settlement report.

3. The State Treasury, the agency(ies) lending investment capital and providing guaranty for investment credit capital:

To compare and certify the already settled investment capital under the loan or guaranty for the completed project within the amount of capital subject to management, settlement, loan and/or guaranty.

4. The agency examining and approving the investment capital settlement:

- To guide, inspect and urge the investor to make the investment capital settlement in strict compliance with the contents, requirements and time stipulated in this Circular.

- To guide and direct the investor to settle problems arising in the course of making the investment capital settlement report.

- To organize the examination of the investment capital settlement report according to the contents, requirements and time stipulated in this Circular.

- To request the investor to provide documents related to the settlement of the project�s investment capital.

- To be answerable for the results of examination of the investment capital settlement or the re-examination results (for projects where auditing organizations are hired to conduct the audit).

- To approve the investment capital settlement of the completed project under its competence.

Part III

IMPLEMENTATION PROVISIONS

This Circular takes effect after its signing and replaces the earlier legal documents guiding the investment capital settlement. The State encourages enterprises and non-State economic organizations to draw up the investment capital settlement reports according to the provisions of this Circular.

In the course of implementation, if any problems arise, the ministries, branches and localities are requested to report them to the Finance Ministry for study, supplement and/or amendment.

For the Minister of Finance

Vice Minister
LE THI BANG TAM